HRM Role in creating competitive advantage

Achieving Strategic Fit:

Sometimes, managers crafting strategies face a dilemma: For example, their analysis may reveal that there are opportunities they could pursue for which they do not have the requisite corporate strengths or assets; or there exist great competitive threats (like those facing Ford) for which the firm has seemingly overwhelming weaknesses. In such situations, should they simply fit capabilities to the opportunities and threats that they see, or, should they stretch well beyond their capabilities to take advantage of an opportunity? There are two possibilities.

Fit: Strategic planning expert Michael Porter emphasizes the fit point of view. He says the manager should ensure that the firm’s functional strategies align with and support its corporate and competitive strategies: It is this fit that breathes life into the firm’s strategy. For example, Southwest Airlines purses a low cost leader strategy, and tailors its functional activities to deliver low cost convenient service on its short haul routes. It gets fast, 15 minute turn arounds at the gate, so it can keep its planes flying longer hours than rivals and have more departures with fewer aircraft. It also shuns frills meals, assigned seats and premium classes of service on which other full service airlines build their competitive strategies.

Southwest’s low cost activity system: limited passenger services; frequent, reliable departures; lean, highly productive ground and gate crews; high aircraft utilization; very low ticket prices; and short haul point to point routes. Various sub activities and decisions support each of these activities. For example, limited passenger service means things like no meals, no seat assignments, no baggage transfers, and limited use of travel agents. Highly productive ground crews mean high compensation, flexible union contracts, and a high level of employee stock ownership. Southwest’s successful low cost strategy reflects a well managed system in which each functional component fits each other component. If Ford is concerned with fit, they’d best take steps to eliminate weaknesses (such as excess capacity) and build their design and management ranks.

Leveraging: Supplementing what you have and doing more with what you have.

Leverage: Alignment is always important, but strategy experts caution against being too preoccupied with strategic fit. They agree that every company must ultimately synchronize its resources and its responsibilities. However, they argue that being too preoccupied with fit can limit growth. Basically, they say there are times when, to pursue opportunities, the manager must underplay the firm’s weaknesses, and instead capitalize on some unique core company strength. Put another way, they say that leveraging resources supplementing what you have and doing more with what you have can be more important than just fitting the strategic plan to current resources. For example, if modest resources were an insurmountable deterrent to future leadership, GM would not have found itself on the defensive with Honda. Dell – competing with giant IBM at the time focused its relatively limited resources on building a direct sale operation and highly efficient order processing and distribution system.

To have an effective competitive strategy, the company must have one or more competitive advantages, factors that allow an organization to differentiate its product or service. Jet Airways, India’s largest full service private airline attained the market leader status partly through its highly trained and motivated employees who provide better ground and cabin service to the customers. Other airlines, like the government owned Air India, faced with a high level of unionization, governmental restrictions and higher aircraft to employee ratio found it difficult to match the customer satisfaction standards of Jet Airways.

The competitive advantage can take many forms. For a pharmaceuticals company, it may be the quality of its research team, and its patents. For a Web site like MySpace it is proprietary software. At Logo Toyota (The New Work Force) it’s the diversity of the workforce and the human resource policies and practices that allow Logo to capitalize on it.

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